The bicycle manufacturer Accell Group, led by KKR, is attempting to revive its cargo bike brand Babboe after a quality scandal that led to the recall of 22,000 unsafe bikes and a criminal investigation by Dutch authorities.
The Dutch Food and Consumer Product Safety Authority NVWA had banned the sale of bicycles in February due to "serious" safety risks, as some frames were prone to dangerous cracks. They ordered a recall and initiated a criminal investigation into the handling of the matter by Babboe.
The crisis has so far cost Accell, one of Europe's largest bicycle companies with brands such as Raleigh, Batavus, and Ghost, 50 million euros. The company was already facing a decline in demand after an unexpected bicycle boom during the pandemic.
Accell was acquired by the private equity group KKR for €1.6 billion in 2022, representing a 42 percent premium over the undisturbed share price. Since then, earnings before interest, taxes, depreciation, and amortization have fallen by more than 90 percent to €12 million last year. The company also faces difficulties servicing its €1.2 billion debt and is in talks with lenders about restructuring. CEO Tjeerd Jegen said in an interview with the Financial Times that the goal is to generate liquidity to "invest in our business." KKR declined to comment.
Jegen, who joined the group from the fashion discount chain Takko in November last year, admitted that he was "somewhat surprised" by the intervention of the NVWA, as the problems at Babboe had not been on his radar. The brand, which was founded in 2005 to produce affordable cargo bikes, was acquired by Accell in 2018 but remained operationally independent. "That was a mistake, but I can't change the past," said Jegen.
An internal investigation following the NVWA ban revealed that the subsidiary — once one of Europe's largest cargo bike brands — had no effective quality control management system, with no systematic records of recurring defects or investigations into the causes, Jegen said.
Therefore, it went unnoticed for years that the frames of some models, especially the two-wheelers, were too weak and prone to cracking, which endangered the riders.
The NVWA declared in a statement at the beginning of the year that Babboe had received "a large number of reports of broken frames" in recent years but did not "pursue them as required by law." It warned that the defects could result in "very serious injuries," including a scenario where "children fall out of the [cargo] box" and into heavy traffic.
Since February, Babboe has been fully integrated into the group and uses "the same quality system" as the other brands, said Jegen.
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"The recall will not be completed until the end of the year. Until then, Babboe will not sell cargo bikes and will instead focus on producing replacement wheels for customers affected by the recall. So far, almost 10,000 affected bikes have been collected, and some customers have already received replacements.
The future of Babboe will only be decided after the recall is completed. "Basically, I think if we do a good job with the recall and bring great, safe bicycles back on the road, we should regain the trust of our customers. At this point, I am not writing off Babboe," said Jegen.
What is already clear is that Accell will withdraw from the lower-priced segment of the cargo bike market. Jegen said that they have learned that Babboe bikes, which were available starting at around 2,500 euros, were positioned at a price level "where it is not possible to produce a safe and high-quality bike.
The NVWA informed the FT that their investigation is still ongoing and declined to comment further.
